CEO FRIDAY: Word of Mouth is Winner Takes All (2/6)

As I mentioned last week, I recently gave a brief talk at the AlwaysOn OnMobile 2011 conference titled “Disrupting the Enterprise” (video). I was asked to give a bit more detail, so I’m doing that now, in six parts. This is the second one; read last week’s and then continue on below.

Condition #2: Word of Mouth is now Winner Takes All

A second, no less important condition is how blogs and social networks now cause conversations to converge swiftly and globally. This means that word of mouth — something that might have previously shown strong regional or vertical tendencies — has instead become a universal phenomenon with “winner takes all” properties.

Now I’m no social scientist, and I think this trend has been growing for a long time. But there are more options than ever to directly broadcast your ideas to world in a completely unfiltered fashion. Prior to the Internet, what were your options to broadcast to the world without the permission of some large publisher? Ham radio? BBS’s helped, but were mostly regional (due to long-distance fees, and Fidonet was a pain). Usenet was limited to very techy spheres. IM was instant and global, but not broadcast. Email mailing lists and web forums are starting to get truly global reach amongst average folk. Comments on blog posts are even better — it combines quality editorial content with feedback from the unwashed masses. (Oddly, Facebook is a step back as you only talk to your friends.)

But Twitter takes the cake. Now anybody can broadcast from essentially any device, using essentially any form of media, to essentially any number of people — at essentially no cost. The “follower” model allows it to take advantage of quality (*ahem*) editorial content, while realtime searching, hashtags, trending topics, and retweets allow even the unpopular to get heard. It’s as close to an unfiltered meritocracy of ideas as we’ve ever seen. All this creates any number of interesting consequences. But of particular relevance to this discussion is that it helps the whole world converge on a consistent story with exceptional speed.

I say this based on the theory that the “distance” an idea travels is some function of the “strength” of the idea and the “resistance” of the medium, and that given two equally strong but conflicting ideas you’re more likely to believe with whichever one you’ve heard longest and most frequently. This means the more resistant the medium, the more it allows competing ideas to survive simultaneously in different regions or “verticals”. Then, by the time the ideas “collide”, each has built up a following that has heard it so often for so long that they’re not nearly as receptive to the idea as had they heard them both first.

But all these advances in broadcast communication have reduced the “resistance” of the medium to such a degree that every new idea is heard by almost everyone, all at once, everywhere in the world. When TechCrunch covers a new product, it’s a matter of hours, minutes, or seconds (but certainly not days or weeks) before everyone who might conceivably care knows. This triggers an immediate global discussion to evaluate the impact of that idea, with the winning option being broadcast further and faster than the loser. The result is on any given topic, there’s one major idea that dominates (the winner), maybe one alternative (the runner up), and that’s about it. Because as information flow goes up, attention span goes down (Twitter’s 140-character limit illustrating this nicely), meaning it’s simply not possible to sustain more than a couple competing ideas on a given topic for long.

When the conversation dies down and everybody moves to a different topic, the winning idea gets the lion’s share of the attention. And because everybody is biased in favor of what they’ve heard the most in the past, the winning idea of the last conversation has an advantage in the next conversation, causing it to strengthen its position over time. So in a field of largely equivalent ideas, once one gets a slight edge, that edge just keeps increasing forever, until all the other ideas are forgotten — even if they might have been nearly as good in the first place.

Why you should care: If you find yourself in a field of equals, with none of you getting any attention, beware: once somebody gets a little attention, they’ll get all the attention. Make sure it’s you.

Expensify example: Even though Expensify is without question the leading small-business expense reporting system out there today, we didn’t start out that way. In fact, a few other very similar options came onto the scene right before or around us (and new ones are springing up all the time). And though I wouldn’t say we were all equivalent (because we actually all had very different approaches), I would say that none had a clear advantage over the other. But somehow we got an edge. I’m not sure exactly what happened: we had good early coverage, knew some good people, were emphatically interactive with and supportive of our early adopters, and just had a really good product. Maybe even the best product. But once we had a slight edge, it wasn’t so much that people suddenly started talking about us a whole lot, but they simply stopped talking about the alternatives. The discussion shifted from “There are several options including X, Y, and Z” (where we might not be listed) to “Concur is for big companies, Expensify is for small companies.” And once you hear that a few times — especially when you try us and realize that we’re actually quite good — it’s just not worth your time to investigate alternatives. After all, if nobody discusses them, how good can they really be? Granted, I’m hesitant to say any of this without knocking on wood — I’m extremely conscious of how fast the tides can turn. But I’m willing to take a chance as I think we now have a very comfortable lead in terms of functionality and usability over any competitor. But back then we didn’t, though you wouldn’t have known it by listening to the global consensus.

Tune in next week to continue the series and read about “A Cascade of App Stores”. (Follow us on Twitter at @expensify to be notified when it comes out.) See you then!